7/29/2019 Lumpsum Contract

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Lumpsum Contract

Is contractor entitled for variation in lumpsum contracts?Yes. Lump sum contract means the contractor has to execute the works for a specified amountfixed in the contract. In a lump sum contract, the contractor is bound to execute works for thecompletion of the project as detailed in the contract documents; in some cases a bill ofquantities will also be included. In either case if a specific work is not detailed in the contractor if alterations are required, then it can be treated as a variation.

Examples of variation in lump sum contracts

An example of variation in lump sum contract is removal of a building or structure which is notdescribed anywhere in drawings or contract documents. Another example is alteration to thedetails mentioned such as replacing painting works with tiling. A variation order is required tobe obtained from the owner/ Engineer before executing the works.

Sometimes a provisional sum will be incorporated in the contract for works which cannot bedetailed or enough information are not available at the time of tender. Please visit earlier posts

on provisional sums, contingency allowance, day works etc. for more information.

Variation provisions are detailed in Clause 51.1 of FIDIC Red Book1987 and Clause 13.1 of1999 edition.

What is Day Work in Construction Contracts?Dictionary meaning of Day work is work done that is paid on a daily basis. In construction contracts thisterm is applied under different contexts.

1. For variations in a lump sum contract, wherein work will be evaluated in accordance with the Day WorkSchedule included in the Contract. Daywork rates for material, labor, plant and contractor profits will bementioned in the contract. In such cases the Contractor should consider supervision charges in his bidthat will not be paid separately. Clause 13.6 of FIDIC Red Book can be referred to for claims wherein a

daywork schedule is included in the contract.

2. For variation purpose in an item rate contract; when item rates are not available within bill of quantities forextra items to be executed, method of day works can be adopted as an option.

How is daywork measured in a lump sum contract?

As mentioned in the previous paragraph rates will be included in the contract for material, labor, plant andcontractor profits. During execution of the works contractor should submit quotations for Engineersapproval. Works can be executed after getting approval in writing from the Engineer. After completion ofthe works the contractor should submit to the Engineer along with IPC (interim payment certificate) all theinvoices, vouchers and receipts of goods, equipments and plant involved in the work.